A Report From Last Friday's OLCC Beer Summit

Prognosis: A rosy future—bottoms up!

When Brian and Todd McMenamin opened their first brewpub in southwest Portland 29 years ago, the beer scene was still pretty sleepy in Oregon. "There was no such thing as plants inside a tavern," Brian recently recalled. "It was dark; it was smoky. We carried every beer brewed in state on tap, and that was 11 beers."

Yes, things are a tad different now. McMenamins alone has 25 breweries, 52 properties (including the Old St. Francis School in Bend), and 2,300 employees dotted across Oregon and Washington. There are 214 or so breweries across the state, in nearly every town, not to mention a rapidly increasing number of craft cideries and distillers. And—if the Oregon Liquor Control Commission's estimates are correct—the economic impact is not only enormous, but will continue to go nowhere but up in future years.

That was the message the OLCC offered in a meeting it held in Bend last Friday to explore the economic impact of alcoholic beverages in Oregon, one attended by several state senators and representatives. It was a message hammered home by multiple speakers, including McMenamin, Deschutes Brewery founder Gary Fish, and Rogue Ales president Brett Joyce.

"What sticks out to me," OLCC chairman Rob Patridge told The Source, "is how much it's growing, between the craft brewing and distilling, and the food-to-table marketing that's going on. I think Oregon really leads the way in that movement. It's a burgeoning business that will not only thrive upon itself, but hopefully bring more economic development to the state as a whole."

Why Oregon, though? Why has this state become such a hub for craft beverages of all varieties? "There are a lot of reasons," Fish said. "We have a lot of really intrepid entrepreneurs and a lot of customers willing to explore and try something new. And, frankly, it rains here. People consume beer indoors more often as opposed to taking it out to the beach, and so the brewpub culture we started with here is a lot easier to explain and exploit instead of taking the risks of
distribution."

The economic results of this movement are striking. The total economic impact of brewing on the state of Oregon topped $1.29 billion in 2012, the highest per-capita rate in the U.S. What's more, as state economist Mark McMullen pointed out, the industry is providing fair to decent middle-wage jobs, and added 4,500 or so since 2008—especially in parts of Oregon that largely missed out on the economic recovery. "You would have to look across a great number of industries to find anything equivalent to this," he said. "Not even the health industry would compare to this."

Joyce, head of Rogue, also mentioned the contribution Oregon's largely friendly alcohol laws made to the cause. Since McMenamin and other outfits successfully lobbied the legislature to legalize brewpubs in 1985, the OLCC has taken measures to keep taxes reasonable, even going so far as to allow small wineries to exempt up to 40,000 gallons of wine from alcohol taxes. It's something Joyce can appreciate, given that Rogue now does 85 percent of its business outside of Oregon. "I was talking with a friend who owns a production brewery in Georgia," he said, "and if you have a brewery there, you can't run a pub on premises. There are some states that are 10, 15, 20 years behind Oregon in very basic issues like growler fills and bottle sales. I think we take a lot of that for granted in Oregon."

It's a great scene, but will it last? The term "craft beer bubble" pops up in industry watchers' minds whenever yet another brewery opens up in Bend or elsewhere. McMullen, at least, didn't think so, noting that the failure rate for breweries in Oregon has remained steady—averaging two or three a year since 2005—despite the recent explosion of new outfits. "A lot of the statewide gain from 2006 to 2014 has been from startups," he said. "They aren't stealing share from other Oregon breweries, but from the macros. The failure rate hasn't
increased, and most of those failures are still outfits that haven't been in business for very long."

But it wasn't all smiles and handshakes at the meeting, with complaints from the speakers including unfairly high taxes on cider producers and the inordinate amount of paperwork required to keep up with state and federal regulations. Yet, overall, the tone was optimistic. For Patridge, who was only appointed chair of the 81-year-old state agency half a year ago, it's a sign that his drive to move the OLCC away from strictly dealing with licensing and enforcement is beginning to bear fruit. "I think that if you talk to long-term OLCC members, they'll tell you that we've had more legislators and industry people in the building in the last year and a half than they've had in the past decade before that," he said. "We have over 12 percent of the revenue that the state is getting; it's the third-largest revenue-generation source. The regulatory stuff is part and parcel of that, but the majority of what we do helps to build a positive market for people to come, live, and work in."